Patrick Newport, U.S. economist at Global Insight, forecasts a 2% drop in the March index, though he said sales have been relatively stable in the past few months. Newport added that there's no reason to expect sales to normalize yet, predicting instead that sales will drop an additional 10% in the coming months before the market sees a bottom.

The PHSI currently stands at 84.6, having declined by 21.4% from February 2007. The report is published by the National Association of Realtors and is used to forecast the existing homes sales index for the following month.

The forecasts for the March report range from a decline as low as 4.0% to an improvement of up to 1.0%.

Charmaine Buskas, senior economics strategist at TD Securities, said the risk is on a downside surprise, considering the weakness in demand recently. Moreover, while credit conditions have improved since the Bear Stearns rescue operation in mid-March, much of the data in this backward-looking index comes from before that easing.

Buskas said the report should continue to support the view that there is no end in sight for the housing market.

February's drop showed mixed results in the four regions. Pending home sales in the Midwest pulled back 3.7%, while sales in the South declined 5.5% and in the West fell 9.8%. The North Eastern region was the only area to report a gain, picking up 3.2% from the previous month.

In the latest existing home sales report from April 22, the pace of sales edged down 2.0% to a seasonally adjusted annual rate of 4.93 million units. This was led by a 2.7% decline in single-family units, which represent four-fifths of the housing market. In addition, the inventory rate bumped up to a rate of 9.9 months.

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